Coforge Shares Gets Dolat Capital's 'Reduce' Downgrade Post Q1 Results On Stretched Valuations
Given the recent run-up in stock price, Coforge's present valuations appear to be stretched, hence Dolat Captial revises rating to ‘Reduce’
(Representative image. Source: Envato)
Coforge is now closer to meeting its FY27 guidance of $2 billion revenue and aims to achieve 14% operating profit margin in FY26. In Q1, the company demonstrated strong execution and a healthy order book, but its PAT missed expectations due to one-time items below Ebit, prompting us to lower our FY26E/FY27E EPS estimate by 7.7%/3.1%.
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Dolat Capital Report
Coforge Ltd. reported revenue growth of 8% constant currency QoQ, led by strong rampup of Sabre deal (Travel vertical up 31.5% QoQ), followed by Others vertical (up 13% QoQ). Ebit margin was flat at 13.2%, with operating leverage and efficiency measures largely offset by higher D&A. PAT miss was accentuated by higher integration/1x bonus expenses.
Order intake is healthy at $507 million (Ex. Sabre, trailing twelve months up 19% YoY), while commentary on pipeline (including via market share gains) and execution remain robust.
Coforge is now closer to meeting its FY27 guidance of $2 billion revenue and aims to achieve 14% operating profit margin in FY26 (our estimate 13.7%).
In Q1, the company demonstrated strong execution and a healthy order book, but its PAT missed expectations due to one-time items below Ebit, prompting us to lower our FY26E/FY27E EPS estimate by 7.7%/3.1%.
Given the recent run-up in stock price, present valuations appear to be stretched, and therefore, we revise our rating to ‘Reduce’ with a target price of Rs 1,750 (valued at 35x of FY27E earnings).
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